Do You Pay Taxes on IUL Withdrawals?

Shawn Plummer

CEO, The Annuity Expert

Understanding Taxation on IUL Withdrawals

Indexed Universal Life (IUL) Insurance: A Brief Overview IUL is a type of permanent life insurance that includes an investment component tied to a stock index. It offers a death benefit and the potential for cash value growth.

Tax Implications on IUL Withdrawals

  • Withdrawals: Taxable if they exceed the basis (the amount you’ve paid into the policy).
  • Policy Loans: Generally not taxable as they’re considered a debt, not income.

Examples of Taxation on IUL Withdrawals and Loans

  1. Withdrawal Exceeding Basis: If you’ve paid $50,000 into your IUL and withdrawn $60,000, the extra $10,000 is taxable.
  2. Policy Loan: Borrowing $40,000 from your IUL cash value is typically not a taxable event.

Conclusion

Understanding the tax implications of IUL withdrawals and loans is crucial. Withdrawals can be taxable, while loans generally are not. This knowledge helps in making informed decisions about your IUL policy.

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Shawn Plummer

CEO, The Annuity Expert

Shawn Plummer is a licensed financial professional, insurance agent, and annuity broker with over 14 years of first-hand experience with annuities and insurance. Since beginning his journey in 2009, he has been pivotal in selling and educating about annuities and insurance products. Still, he has also played an instrumental role in training financial advisors for a prestigious Fortune Global 500 insurance company, Allianz. His insights and expertise have made him a sought-after voice in the industry, leading to features in renowned publications such as Time Magazine, Bloomberg, Entrepreneur, Yahoo! Finance, MSN, SmartAsset, The Simple Dollar, U.S. News and World Report, Women’s Health Magazine, and many more. Shawn’s driving ambition? To simplify retirement planning, he ensures his clients understand their choices and secure the best insurance coverage at unbeatable rates.

The Annuity Expert is an independent online insurance agency servicing consumers across the United States. The goal is to help you take the guesswork out of retirement planning and find the best insurance coverage at the cheapest rates

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